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Average True Range (ATR) stop loss method is more popular among the experienced traders. In some countries like India it is also known as Day Moving Average (DMA).
Please note that MA (Moving Averages are different than ATR or DMA). Simply put, Moving Averages are calculated on the closing price of a stock on daily basis. It can go from last 5 trading days up to 200 trading days. Moving Averages are mostly used by stock traders who buy stocks for the short or medium term, not Intraday or day traders.
How Is the ATR / DMA Calculated?
The percentage of the difference between the highest point and the lowest point of daily moving averages of last few days is taken into account.
Day traders usually take last 5 days Average True Range, ATR or Day Moving Average, DMA. Some take last 14 days moving averages. Positional traders usually take last 30 days ATR or DMA.
Let us take the last 5 days ATR (Average True Range) of Nifty 50. As on today, the last 5 trading days are 29, 30 Dec 2016, 2, 3 and 4 Jan 2017:
Here is the image of daily high and low of the last 5 days taken from the NSE site:
Calculating the Day Moving:
90.30 + 82.25 + 78.20 + 70.50 + 37.60 = 358.85 / 5 = 71.77
71.77 is 0.87% of 8256.00 the current spot Nifty price.
Therefore if a day trader has bought Nifty Future to trade Intraday when Nifty spot is at 8256.00 his Stop loss will be at 8256-72 = 8184.00, and sell target, profit will be at 8256+72 = 8328.00. If at the end of the day the trade is in small profit or loss the day trader will exit as the trade was initiated for Intraday day trading and not positional trade.
The three types of stop loss methods of Intraday or Day Trading:
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2. If you are a new option trader, not much experienced and are making losses you can do my paid course. I recommend Nifty Conservative Option Course for beginners because it is easy to understand and easy to trade. Even a 18 year old young trader or a housewife can learn it and start trading from next day. It will help you to earn consistent monthly income without any software or speculation or stress or big risk. You will learn proper hedging strategies that works in any market condition.
3. If you are banknifty weekly options trader you can do my Bank Nifty Weekly Options & Futures Strategy Course. You will learn future and option hedging strategies that works in volatile market condition.
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Here is complete process of my course1. Once you pay I will send you the course materials for studying to your email.
2. You read and ask me questions via phone/whatsapp/email to clear doubts.
3. Then you start paper trading and still can ask me questions.
4. After about one month you can start trading.
5. Since doubts can come anytime the support will be there for one year.
Within one month you can start trading on your own. No need to depend on anyone once you are on your own.
If you have any question you can contact me.
You can read about me here and my trading mistakes here.
Dilip Shaw, Founder
INCOME DISCLAIMER: Any references in this site of income made by the traders are given to me by them either through Email or WhatsApp as a Thank You message. However every trade depends on the trader and his level of risk taking capability, knowledge and experience. Moreover stock market investments and trading are subject to market risks. Therefore there is no guarantee that everyone will achieve the same or similar results. My aim is to make you a better & disciplined trader with the stock trading and investing education and strategies you get from this website. Please note that I DO NOT give tips or advisory services by SMS, Email, or WhatsApp or any other form of social media. I strictly adhere to laws of my country. I only offer education on finance, investments on stock markets in the best possible way as much as I can through this website. Still, you must consult an authorized advisor or do thorough research before investing in any stock or derivative before trading any strategy given in this website. I am not responsible for any investment decision you take after reading any article given in this website. Knowledge is the only way to get success in stock markets. I try my best to give stock market investing and trading knowledge through the articles posted in this website. Thanks for visiting my website.